Meta Reportedly Abandons Diem Stablecoin Project After Intense Government Opposition
After surviving a major re-branding and fierce opposition from regulators and central bankers, Facebook's effort to create a global stablecoin usable on its platform has reportedly been scrapped, according to a Bloomberg report.
BBG reported late Tuesday that Facebook-owner Meta has been looking for a buyer for its Diem project after the Federal Reserve and several powerful American lawmakers (including notably Sens. Sherrod Brown and Elizabeth Warren) produced enough resistance to the project to leave it finally dead in the water. At one point, a couple of Democratic senators sent threatening letters to people involved with the project.
The Diem Association, a cryptocurrency initiative once known as Libra backed by Meta Platforms Inc., is weighing a sale of its assets as a way to return capital to its investor members, according to people familiar with the matter. Diem is in discussions with investment bankers about how best to sell its intellectual property and find a new home for the engineers who developed the technology, cashing out whatever value remains in its once-ambitious Diem coin venture, said the people, asking not to be identified because the discussions aren’t public.
As a result, the cryptocurrency ambitions of Meta chief Mark Zuckerberg have unraveled.
Former Twitter CEO and bitcoin evangelist Jack Dorsey could not resist taking a quick shot...
The news has also hammered shares of Silvergate, the obscure banking partner that was supposed to issue the stablecoin, before being bogged down in resistance from regulators.
In addition to the "rebranding" (the project was originally known as Libra), the project sent anti-trust hawks into a tizzy, while central bankers accused Facebook of trying to usurp their control over the money supply. In the years since its introduction, the SEC has won the "battle of the regulators" over who will be the primary regulator of stablecoins, while the Fed has sought to create a stablecoin of its own nicknamed "Fedcoin".
Given the intense hostility to the Diem project (which is technically controlled by a nonprofit foundation that is itself controlled by Meta), some speculated that Diem might be co-opted and become Fedcoin by default.
After all, it was the Fed that dealt the killing blow to the project, per BBG.
Diem said in May that an affiliate of the firm, Silvergate Bank, was to be the issuer of the Diem USD stablecoin, a type of cryptocurrency pegged to the U.S. dollar that’s typically used to buy and sell other crypto. After a lengthy back-and-forth between the Diem advocates and regulators, Fed officials finally told Silvergate last summer that the agency was uneasy with the plan and couldn’t assure the bank that it would allow that activity, the people said.Without a green light from the bank’s regulator, Silvergate was left unable to issue the new asset with confidence the Fed wouldn’t crack down, and so the Diem effort had no coin.
Facebook had already abandoned the original Libra concept - one coin backed by a basket of global currencies - in favor of creating a more traditional dollar-linked stablecoin more in line with what the Fed might want.
So, now that Diem is up for grabs, the big question is: will the Fed step in, co-opt the technology, and use it to catch up with the PBOC, which has already produced its own "e-RMB" (even if the project appears to still be in the troubleshooting phase)?
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- Stock down 33% this week so far
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- Tenaris Raised to Outperform at Exane; PT 13 euros
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- Deutsche Boerse Cut to Neutral at Citi
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- ADP, Aena Among Cuts on Stretched Airport Valuations: Berenberg
- Vestas (VWSB TH) -9.9%
- Vestas 2022 Revenue Forecast Misses Estimates
'Ethereum Killer' Rocked By Outages, Solana Co-Founder Blames "Growing Pains"
Once heralded as the "Ethereum Killer", cryptocurrency Solana has crashed almost 70% from its November highs amid a series of outages and bot attacks that have left traders and users frustrated to the point where many are raising questions about its viability.
The network had become the natural alternative to ethereum after bursting into the limelight last year. Ethereum’s high fees and slow transaction times had been a pain in the behind for its users and with Solana coming in as a shiny new alternative, users flocked to it.
But, as Bloomberg reports, the protocol suffered its sixth serious outage of more than eight hours this month over the weekend, which a notice on its website attributed to excessive duplicate transactions causing a high level of network congestion.
During these periods of network instability, crypto traders are often left unable to sell off their positions as transactions fail to complete on Solana’s network, yet another sign of how unreliable this emerging technology can be during times of stress. When combined with a market-wide crash in crypto prices, investors scrambling to offload their tokens are left to figure out other routes while their portfolios rapidly decline.
For now, Solana is being dumped in favor of Ethereum over the weekend's latest outages...
Yakovenko further stoked traders’ ire during the crypto crash by making light of Solana’s instability. The Solana Labs co-founder attached a screenshot showing a Solana node reporting 2.05 million duplicate data packets being submitted to the network, accompanied by the caption ‘lol’.
There are some sematics involved here as Decrypt notes that technically the Solana network hasn’t experienced a full outage since September’s extended downtime, but it is hard to arguer that it has been smooth sailing the last few months for the rising layer-1 blockchain. Following recent network performance issues, Yakovenko has detailed the platform’s “growing pains” as it scales to meet demand.
Yakovenko disputes claims that the network went down and data from blockchain explorers support that view. But even if Solana was still functioning, it did so at a weakened level. Solana’s own status website shows a “partial outage” for nine days so far in January, citing either “degraded performance” or “network instability” as the reason for each.
“The network has not experienced any periods of downtime since September,” Yakovenko wrote today.“Despite that, the user experience is not what it should be today.”
Late last week and into the weekend, Solana users took to social media and Discord to complain of frequent issues. Transactions on the network were getting stalled, often taking considerably longer than normal to complete or outright failing as the network struggled to maintain its typical throughput level measured in transactions per second (TPS).
In a statement shared with Decrypt this morning, Yakovenko wrote that the mark has reached a recent average of 800 TPS, down from the typical mean above 3,000 TPS. (For context, Ethereum, the leading smart-contract blockchain network, can handle roughly 15 transactions per second, on average.)
With about a quarter of the usual transaction throughput on Solana, users attempting to send and receive funds, interact with DeFi tools (peer-to-peer lending and trading applications), and buy and sell NFTs have had issues.
Unlike September’s downtime, which was blamed on an overload of transactions submitted by bots attempting to manipulate a token launch, Yakovenko wrote that the “overwhelming majority” of recent transactions are legitimate—“from normal market DeFi activity, not malicious users or coordinated attacks.”
“The outages are partly a function of Solana’s success, in that the usage and developer activity has grown significantly faster than the maturity of the protocol,” Alkesh Shah, global crypto and digital asset strategist at Bank of America Securities Inc., told Bloomberg.“In some ways, it’s a high-class problem, having so many transactions meaning it’s an attractive platform for developers and users.”
“The real indicator will be if developer activity and transaction activity significantly slows,” said Shah.
“That would mean that people are not viewing the benefits of Solana versus the challenges of its growing pains. At this point, that’s not happening.”
With more and more of these complex transactions in the mix, Solana validators are struggling to keep on top of the constant flow of user demands.
“The network is experiencing growing pains as it onboards a new class of sophisticated builders and users,” Yakovenko wrote.
Finally, we do note that Solana isn’t the only one having issues.
Ethereum continues to be plagued by scaling difficulties and extremely high gas fees, while newcomers like Polygon PoS saw costs spike by more than seven times in a month in January as play-to-earn video games clogged up demand.
“The ecosystems that are being built on Ethereum and the alternative blockchains are still thriving. There is no 'winter' for that ecosystem growth, and that’s really where the value is going to be added,” concluded Shah.
DAX:
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- Adidas (ADS TH) +0.9%
- Covestro (1COV TH) +0.9%
- Deutsche Boerse (DB1 TH) -0.2%
- Deutsche Boerse Cut to Neutral at Citi
MDAX:
- Lufthansa (LHA TH) +2.5%
- Lufthansa May Buy Stake in Italy’s ITA by 2023 or 2024: Corriere
- Wacker Chemie (WCH TH) +2.5%
- Wacker Chemie Prelim FY Ebit About EU1.09B
- AUTO1 (AG1 TH) +2.5%
- Varta (VAR1 TH) +2.2%
- Thyssenkrupp (TKA TH) +1.6%
SDAX:
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- Aareal Suitors Increase Takeover Offer After Activist Protest
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- Nordex (NDX1 TH) -1.2%
In Catastrophic Month For "Smart Money", Goldman Saw Biggest Hedge Fund Buying Since 2020 On Monday
Amid record volumes and a sharp intra-day price reversal in the US equity markets yesterday, and with confused retail investors first panic selling then panic buying as they chased the unprecedented reversal in momentum on Monday...
... the Goldman Sachs Prime book saw the largest 1-day net buying since Nov ‘20 (a +3.9 standard deviation vs. the average daily net flow of the past year), driven by short covers and to a lesser extent long buys (1.6 to 1). North America was by far the most net bought region followed by EM Asia, while DM Asia was the most $ net sold.
Here is the breakdown from the latest Goldman Prime report. There are some staggering datapoints here.
- After 8 straight days of net selling, US equities on the GS Prime book saw the largest $ net buying since Dec 17th (+3.4 SDs), driven short covers and to a lesser extent long buys (2.3 to 1).
- Yesterday’s $ short covering in US equities – driven by Macro Products – was the 5th largest in the past five years (+3.0 SDs).
- US ETF shorts decreased 4% (ex. MTM) – the largest 1-day reduction since Oct ’20 – driven by covers in Broad-Based Equity and Technology ETFs.
- Single Stocks saw the 3rd largest $ net buying in the past five years (+4.1 SDs), driven by long buys and to a lesser extent short covers (4 to 1).
- With the sole exception of Energy, all sectors were net bought led in $ terms by Consumer Disc, Info Tech, Comm Svcs, Health Care, and Industrials.
- Following 7 straight days of net selling, Consumer Disc stocks saw the largest $ net buying since Jun ’21 (+3.8 SDs) driven by long buys and short covers (1.4 to 1).
- Info Tech stocks were net bought for a second straight day and saw the largest $ net buying since Dec 17th (+2.1 SDs), driven by long buys and short covers (2.5 to 1).
- Most $ Net Bought Industries – Software, Interactive Media & Svcs, Hotels, Restaurants & Leisure, Internet & Direct Marketing Retail, Entertainment, IT Svcs, Biotech, Multiline Retail
- Most $ Net Sold Industries – Tech Hardware, Capital Markets, Oil, Gas & Consumable Fuels, Media, Pharmaceuticals, Metals & Mining, Banks, Household Durables
What about performance?
Well, on Monday, hedge funds lucked out: according to GS Prime, fundamental LS managers were down as much as -2.2% intra-day before recovering amid the price reversal, and closing -0.2% (alpha +0.2%) vs MSCI Total Return -0.6%. We suppose a similar pattern was observed on Tuesday.
But while hedge funds may have been saved by that mystery put seller we profiled yesterday, they are still facing a world of pain (and unprecedented redemption requests): according to Goldman, so far in January, Fundamental L/S funds are down 7.2% (alpha -4.0%) after just 16 trading days in 2022.
And the devastating punchline: according to Goldman "since we starting compiling performance estimates using Prime positions in Jan ’16, Fundamental LS returns had only experienced worse drawdowns in March ’20, and Q4 ’18."
And instead of having conviction one way or another and risking capital to justify their ridiculous performance fees, the so-called smart money is now absolutely clueless, and net leverage has collapsed to one year lows and sliding fast.
And in this environment where everyone is losing money and nobody knows what to do, it is not surprising that emini liquidity has cratered to levels not seen since March 2020... when the Fed had to inject $5 trillion and backstop the bond market with direct purchases of corporate bonds, to reboot the market.
Translation: good luck to Powell tomorrow and the Fed with those "six or seven hikes" and balance sheet runoff...
U.S. equity futures climbed and Asian stocks were mixed Wednesday as traders awaited a Federal Reserve decision that could buffet markets by shaping expectations for monetary-policy tightening. Technology stocks advanced in Hong Kong, China averted a technical bear market and Japan wavered after entering a correction. U.S. contracts initially sank in Asia before turning higher, while European futures were in the green. Wall Street delivered another volatile session Tuesday. The S&P 500 erased a near-3% intraday slide but later fell again to the lowest since October amid a tech selloff. Microsoft Corp. rebounded in extended trading on reassuring forecasts after releasing earnings. Crude held most of its rally, in part on the risk that any Russia-Ukraine conflict could disrupt supplies. Traders are waiting to see how hawkish the Fed sounds in the fight against high inflation -- both over interest-rate hikes expected from March and subsequent reductions in its holdings of Treasuries. Global stocks have already shed some 7% in 2022. Goldman Sachs Group Inc. strategists warned that the risk of a “growth shock” to equities is increasing. The International Monetary Fund cut its global economic expansion forecast for 2022, citing weaker prospects for the U.S. and China along with persistent inflation. In the cryptocurrency sector, Bitcoin held on its gains for the week, trading at around $37,000.
US After Hours MSFT rebounds during earnings call, now up 3%; TXN +3.7% also higher on earnings; FFIV -13.6%, NAVI -9.3% lower on earnings
Nikkei -0,44% Hang Seng +0,12% CSI +0.724% Shanghai +0.66%% Shenzen +0.68%
Eur$ 1,1304 CNH 6,3273 CNY 6,3223 JPY 113,89 GBP 1,3507 CHF 0,9175 RUB 78,5897 TRY 13,4712 WTI$ 85,22 -0,40% Gold 1,847,45 -0,30% BTC 37,800 ETH 2,490
S&P +0,12% Nasdaq +0,41% EuroStoxx +0,68% FTSE +0,89% Dax +0,65% SMI +0.32%
Macro :
- BofA Says ‘Too Early to Buy Tech’ Amid Valuation and Rate Risks
- Goldman Doesn’t See Big Disruption to Energy Flows Over Ukraine
- U.S. Approves Possible $2.2 Billion Arms Sale to Egypt
- SPAC Short Sellers Make $1.2 Billion Paper Gain From Faded Mania
Keep an eye on :
Keep an eye on :
- ARL GY : Advent, Centerbridge Raise Offer for Aareal to EU31/Shr in Cash
- ADP FP : French Transport Minister Calls 5G Rollout Near Airports Simple
- AIR FP : Hydrogen-Fueled Planes Could Clean Up Third of Air Travel: ICCT
- AIR FP : *BOEING 777S, 747S SUBJECT TO 5G INTERFERENCE, U.S. FAA SAYS
- AIR FP : Boeing, Qatar Airways in Talks to Launch 777x Next Week: Rtrs
- AI FP : Air Liquide to Invest About $60m Amid Pact for Arizona Factory
- BARN SW : Barry Callebaut 1Q Sales Beat Estimates
- BNP FP : BNP Offers Spanish Private Banking to March, Singular: Expansion
- COFB BB : Cofinimmo to Divest Office in Brussels Periphery for About EU23m
- DOV IM : Dovalue Sees FY Gross Revenue at EU565m-EU575m, Div EU0.50/Shr
- EDP PL : EDP Sells EU562m of the 2021 Portuguese Tariff Deficit
- EMMN SW : Emmi FY Sales CHF3.91B Vs. CHF3.71B Y/y
- GJF NO : Gjensidige 4Q Pretax Profit Beats Estimates
- NK FP : French Materials Firm Imerys Is Said to Eye $1 Billion Unit Sale
- IDIA SW : Idorsia Expands Daridorexant Marketing Partnership With Syneos
- INCY US : Incyte to Withdraw New Drug Application for Parsaclisib
- INRN SW : Interroll FY Sales Meets Estimates
- LONN SW : Lonza FY Sales Beat Estimates
- LHA GY : Lufthansa May Buy Stake in Italy’s ITA by 2023 or 2024: Corriere
- PHR PL : Pharol Says EU Commission Decision Has No Impact on Earnings
- PTEC LN : Playtech Exploring Contingency Plan to Breakup Operations: Sky
- RIEN SW : Rieter FY Sales Beats Estimates
- RWE GY : RWE Urges Germany to Intervene to Counter Gas Bottlenecks: FAZ
- RWE GY : RWE Urges Germany to Intervene to Counter Gas Bottlenecks: FAZ
- SK FP : SEB 4Q Sales EU2.49B Vs. EU2.23B Y/y
- SMCP FP : SMCP Board Panel to Study How to Stabilize Shareholder Base
- SO FP : Somfy 4Q Sales Beats Estimates
- SON PL : Sonae MC Says 2021 Preliminary Sales Rise 6.3% to EU5.36b
- TOD IM : Tod’s FY Preliminary Rev Eu884m, +38.7% Y/Y
- VWS DC : Vestas 2022 Revenue Forecast Misses Estimates
- VOD LN : Vodafone to Switch Off U.K. 3G Network Next Year
- WCH GY : Wacker Chemie Prelim FY Ebit About EU1.09B
- ZURN SW : Suncorp, Chubb Interested in Zurich Insurance Assets: Australian
>>> Up
* Addtech Raised to Buy at SEB Equities; PT 174 kronor
* Allfunds Raised to Buy at Citi
* Atlas Copco Raised to Buy at Kepler Cheuvreux; PT 615 kronor
* Atlas Copco Raised to Buy at Pareto Securities; PT 620 kronor
* Autostore Raised to Buy at Citi; PT 38 kroner
* B&M European Raised to Neutral at Goldman; PT 610 pence
* DSV Raised to Outperform at Bernstein; PT 1,500 kroner
* EasyJet Raised to Buy at Stifel; PT 750 pence
* Intertek Raised to Overweight at JPMorgan; PT 6,400 pence
* KWS Saat Raised to Buy at Stifel; PT 82 euros
* Lindt & Spruengli Raised to Outperform at Bernstein
* Lufthansa Raised to Buy at Stifel; PT 10 euros
* Lundin Energy Raised to Hold at Kepler Cheuvreux; PT 390 kronor
* Novozymes Raised to Buy at Carnegie; PT 525 kroner
* Remy Cointreau PT Raised to 295 euros at Deutsche Bank
* Richemont Raised to Hold at SBG Securities; PT 145 Swiss francs
* Richemont Raised to Hold at SBG Securities; PT 145 Swiss francs
* Tenaris Raised to Outperform at Exane; PT 13 euros
* Zurich Airport Raised to Buy at Stifel; PT 200 Swiss francs
>>> Down
>>> Down
* abrdn plc Cut to Hold at Berenberg; PT 260 pence
* ADP Cut to Sell at Berenberg; PT 98 euros
* Aena Cut to Hold at Berenberg; PT 145 euros
* Aena Cut to Hold at Stifel; PT 150 euros
* Deutsche Boerse Cut to Neutral at Citi
* Europris Cut to Hold at ABG; PT 70 kroner
* Flughafen Wien Cut to Hold at Berenberg; PT 32 euros
* Investors House Cut to Sell at Inderes; PT 5.20 euros
* Investors House Cut to Sell at Inderes; PT 5.20 euros
* Zurich Airport Cut to Sell at Berenberg; PT 140 Swiss francs
>>> Initiation
* ContourGlobal Rated New Buy at Liberum; PT 305 pence
>> Call
>>> Initiation
* ContourGlobal Rated New Buy at Liberum; PT 305 pence
>> Call
* ADP, Aena Among Cuts on Stretched Airport Valuations: Berenberg
* Buy the Stocks Dip, Especially Outside U.S.: Citi Strategists
* ContourGlobal ‘Agile and Value-Focused,’ New Buy at Liberum
Microsoft Saved by the PC
Windows upgrade lifts results as cloud business shows some deceleration
It’s an interesting time for Microsoft MSFT -2.66% to go old school.
The first of the big tech giants to report results for the December quarter seemed to face a daunting task ahead of its quarterly results announcement on Tuesday afternoon. Market turbulence has slashed market values; Microsoft, Apple, Amazon and the parent companies of Google and Facebook have collectively shed nearly $1.3 trillion since the start of the year. And while much of that action has been driven by broad fears over inflation, interest-rate increases and the economy’s health, there has been some worry specifically about Microsoft’s ability to sustain what has been an incredible run of accelerating sales growth while also expanding operating profit margins.
In that light, the company’s fiscal second-quarter results and accompanying forecast were good enough—but barely. Revenue rose 20% to $51.7 billion, beating Wall Street’s forecast by about $1 billion. That beat came entirely from strong PC sales that lifted revenue for the company’s More Personal Computing segment by 15% to nearly $17.5 billion. Microsoft’s cloud and business software segments were in line with expectations, but they also showed some deceleration from the growth rates seen in the previous quarter. Microsoft Cloud, which combines all of the company’s cloud-related ventures, saw revenue rise 32% year over year to $22.1 billion compared with a 36% jump in the September quarter.
The company projected a similar pattern for the current quarter ending in March, with revenue from the PC-related segment expected to come in nearly 5% ahead of Wall Street’s forecasts. Chief Executive Officer Satya Nadella said on the company’s conference call that Microsoft was experiencing a “PC renaissance,” helped by the recent launch of a major update to its Windows operating system. Projections for the company’s Intelligent Cloud segment, by contrast, were less than 2% ahead of analysts’ expectations.
The forecast was deemed good enough to lift Microsoft’s stock after hours following an initial slip. But the PC burst might prove short-lived; market tracking firm IDC projects PC shipments will be flat this year after a 12% jump in 2021. And Microsoft’s cloud business also faces more challenging comparisons in the year ahead after averaging 34% year-over-year growth per quarter in calendar 2021.
Microsoft’s stock has been a star, averaging 50% annual gains over the past three years and lifting the company’s market value past $2 trillion. But in a market that is re-evaluating its taste for risk—and the concentration of that risk on a few tech giants—the next trillion may prove harder to come by.